Is General Motors Nagging The Treasury To Sell Remaining Ownership Stake?
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According to a report from the Wall Street Journal (via MarketWatch), the Treasury Department is dismissing pressure from General Motors to sell the remainder of its stake in the automaker. According to the report, executives at General Motors are irritated by the Treasury’s ownership position and say that it hurts the automaker’s reputation and hampers its ability to attract top talent due to pay limitations.
In addition, the automaker reportedly presented a plan to repurchase 200 million of the 500 million shares held by the Treasury, with the balance to be sold via a public offering. However, Treasury officials maintained that selling would result in multibillion dollar loss for the government.
As a reminder, individual and institutional investors are currently the biggest cumulative owner of GM stock, being in control of 44.9 percent of the company. The U.S. Treasury owns nearly 32 percent of The New GM, while the Canadian Government and VEBA own 9 and 10.2 percent, respectively. All of this is, of course, the result of the $50 billion bailout in 2009 as well as GM’s subsequent Initial Publish Offering in 2010.
The GM Authority Take
Of course, this remains a morass of a topic that no one seems to enjoy discussing… and given the looming presidential election and the political consequences associated with the matter, we don’t expect any moves to be made until two possible scenarios take place:
- GM has enough cash to buy the remaining stake itself — something we don’t foresee happening until it can a) finish handling its pension liabilities and b) get its European operations into the black. Separately, could it be that GM was seeking an increase in its credit line for the purpose of buying out its shares itself? If so, this DBRS rating should help.
- GM’s stock appreciates to a point that makes sense for the U.S. Treasury to sell its stake. But then, when would the other private owners sell their shares?
Until one of these events takes place, we can only sit tight and not let the nitwits bite.
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And what should GM pay for the shares if they bought them?
If they paid the current $25 the government would lose $25 billion. People would be pissed and the GM backlash high BUT over time would subside as GM continues to be profitable.
Or do they pay the $51 and make the government whole? The anti GM backlash may go down a bunch then and perhaps sales would go higher. But a $26 billion over payment is way too much to make up for the forseeable future.
I do not see any good scenario for GM and the government unless the stock price takes a big jump and with all the crap going on in the world this will take a long time.
Only possible scenario I can see is Romney becomes president and his first act is to sell just so the government does not own a public company. Many will always be pissed at GM but many will be happy that the government does not own them.
Whoever really knows the truth in all this, please …… Does anybody? Every bit of this is no more than political hay and anyone postulating their opinion is pushing their own agenda.
USA should keep there hand in GM… It was GM words that got them the bail out any way.. [ IF WE GO DOWN ALOT OF POEPLE WILL LOST THERE JOBS ] And the last time i look that was this goverments job .. Keep the country working … Not outsourcing job.. They do it in mother RUSSIA.. The USA should Keep there heads on .. Look at the move TO BIG TO FAIL ! ! ! P.S. Then dont ask for the money .. Hell I know Good shy Lack..